Superannuation

Super Reform (Contributions)

On 1 July 2017 rule changes will come into effect that may impact your retirement strategy and possibly the contributions you make into superannuation. 

  1. The cap on concessional (pre-tax) super contributions will reduce from $30,000 pa or $35,000 pa (depending on age) to $25,000 pa.
  2. An additional 15% tax on concessional contributions will be payable by people with incomes greater than $250,000 pa (currently $300,000 pa).
  3. The cap on non-concessional (after-tax) super contributions will reduce to $100,000 pa (currently $180,000 pa) and $300,000 when using the ‘bring-forward’ rule (currently $540,000). Other conditions also apply.
  4. Non-concessional contributions will not be able to be made if you have a total superannuation balance over $1.6 million.

It’s important to review your current contribution strategy to assess the impact of these changes and any amendments that may be required.   Care should be taken to avoid contributing in excess of the contribution caps, as this can result in tax penalties.

Super Reform (Pension Caps)

A lifetime limit of $1.6 million (subject to indexation) will apply to the amount of superannuation that can be transferred into ‘retirement phase’ accounts.   This limit applies to existing pensions and those commenced after 1 July 2017.

Amounts exceeding the $1.6 million transfer cap won’t have to be withdrawn from the super system.   The excess amount can stay in the ‘accumulation’ phase where earnings are generally taxed at 15%, but in most cases the actual tax rate paid is a lot lower when deductible expenses, franking credits and other items are taken into account in the fund.

Capital gains tax relief may be available when converting money held in the retirement phase back into the accumulation phase to meet either of the above.

If you think you might be impacted by this measure you should speak to us today.